Dubai construction industry is dead for 2010

Khaldoun Tabari, Drake & Scull

In what is a damning indictment of the Dubai debt crisis, Khaldoun Tabari, vice chairman and CEO of Dubai-based engineering contractor Drake & Scull International, has said the construction industry in Dubai has no chance of recovery in 2010.

Speaking to Arabian Business at the Arabian Business Conference 2009, Tabari said that for businesses who operated solely in Dubai things were going to get a lot more serious.

"If you are 100 percent in Dubai with nothing outside you are dead," he stated. "What does it mean if you are dead? If you are a construction company and you pay 10,000 or 20,000 people, and you do not get any work because there's an abundant supply of buildings, you are going to be bankrupt."

Kicked when already down

Construction firms had already suffered major setbacks during the economic downturn. In the UAE, some 566 projects had been shelved or cancelled, the majority in Dubai. Despite this, the sector had just started to get back on its feet.

However, since news broke of the Dubai debt crisis, things have gotten worse again with certain press outlets running stories that a room in Doncaster is cheaper than Dubai. And Tabari believes things are only going to get worse for the region.

"We had hundreds of real estate developers, but these are not going to exist anymore, that's a simple fact," he said.

"There's going to be consolidation or they're going to go out of business, because they're not going to make their payments. We're going to see less and less developers in this business; it will be an orderly exit."

The financial crisis is expected to cause a significant reduction in the rate of growth for the UAE. Last week, the International Monetary Fund said that the Dubai property-based economy had dented confidence in the Gulf Arab business hub and would, as a result, lead to higher credit borrowing costs and even impact neighbouring countries.

Not just that, but the growth rate would fall to between 1 and 3 percent. Despite this, it is unlikely that the Dubai debt crisis will cause a 'second recession' and that any impact on international banks could be 'contained and managed'.

Relevant articles:

How will the Dubai crisis affect UAE growth? | Is Abu Dhabi going to help Dubai? | The Dubai debt crisis

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